Crime Watch: December 7, 2012

James and Theresa DeMuro of Bridgewater, New Jersey, were each sentenced by US District Judge Anne E. Thompson to forty-four months in prison, followed by three years supervised release, the Justice Department and the IRS announced on November 30. Judge Thompson also ordered the DeMuros to pay restitution to the IRS in the amount of $1,337,952.12.

A jury had convicted the DeMuros of one count of conspiracy to defraud the United States and twenty-one counts of willfully failing to pay over employment taxes. The sentencing followed an April 23, 2012, order by the US Court of Appeals for the Third Circuit, which affirmed the convictions but remanded the case for resentencing.

According to the indictment and evidence introduced during trial, the DeMuros co-owned and operated an engineering and surveying firm called TAD Associates LLC dba DeMuro Associates. From 2002 through 2008, they withheld employment taxes from their employees' paychecks but failed to pay more than $546,000 in taxes to the IRS. In addition, they operated under a prior entity name DA Resources Inc., which they ceased operating in an effort to thwart the ability of the IRS to collect unpaid employment taxes related to that entity.

At trial, the government introduced evidence that, beginning with the first quarter of 2007 through the last quarter in 2008, the defendants paid employees' wages and withheld employment taxes from paychecks but did not pay any of the employee withholdings to the US Treasury. In addition, the DeMuros withheld funds from their employees' paychecks for health insurance, child support, and retirement savings accounts, and failed to pay these funds over to the appropriate entities.

Evidence was also introduced that the DeMuros converted withheld funds for their business and personal use, including more than $280,000 in purchases from QVC, Home Shopping Network, and Jewelry Television.

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Texas Tax Return Preparer Convicted of Falsifying Returns

Anitra Broussard, a Texas tax return preparer, has pleaded guilty to charges she prepared false tax returns for clients during 2011, US Attorney Kenneth Magidson announced on November 27.

Broussard appeared for a re-arraignment hearing before US District Judge Lynn Hughes. According to the plea agreement, Broussard acknowledged she knowingly prepared a number of false federal income tax returns that generated excessive refunds for clients for tax year 2011. She further admitted these tax returns included false deductions and credits that were intended to cause, and did cause, losses to the United States Treasury of at least $21,587.

In particular, Broussard acknowledged that on January 30, 2012, she knowingly prepared a false

2011 US Individual Income Tax Return - Form 1040 for a client. That return included a false Education Credit of $1,368; a false American Opportunity Credit of $998; and reported false Schedule C expenses for advertising ($2,162), repairs and maintenance ($3,012), and supplies ($1,640) in order to generate a fraudulent refund of approximately of $4,371. Additional losses resulted from other false tax returns that she prepared for clients.

Broussard faces up to three years in prison and $250,000 fine at her sentencing, set for February 25,

2013. She was permitted to remain on bond pending that hearing.

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Florida Man Charged with Filing False Claims for Tax Refunds

On December 4, a federal grand jury in Fort Lauderdale, Florida, returned an indictment charging Paul F. Wrubleski with corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds, the Justice Department and the IRS announced.

According to the indictment, Wrubleski impeded the IRS by filing False W-4s that claimed he was exempt from income tax withholding, and filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds.

Wrubleski also sent obstructive letters, tax returns, and other false documents to the IRS between 1999 and 2010. In addition, the indictment alleges that Wrubleski filed for bankruptcy in 2006 to impede IRS collection actions.

If convicted on all counts, Wrubleski faces a maximum potential sentence of twenty-three years in prison and faces a fine of up to $1.2 million.

The United States has asked a federal court to shut down a Mo' Money Taxes tax preparation office in Nashville, the Justice Department announced December 5. The civil injunction suit, filed against Mo' Money licensee Toney Fields and codefendant Trumekia Shaw in US District Court in Nashville, alleges that the two defendants intentionally prepare and file fraudulent federal income tax returns to obtain improper tax refunds for customers.

According to the complaint, Fields and Shaw get an improper jump on their competition by opening Mo' Money Taxes in Nashville in late December and before the tax year ends. The defendants allegedly use customers' end-of-year pay stubs to prepare tax returns, before employers have issued IRS W-2 wage-statement forms to employees. Preparing tax returns based on pay stubs rather than proper W-2 Forms violates IRS rules. Fields and Shaw allegedly use the pay stubs to create fake W-2 Forms to include with the returns. End-of-the-year pay stubs frequently omit income and distributions that are shown on employer-issued W-2 Forms. This inevitably results in errors on federal tax returns.

The lawsuit further alleges that Fields and Shaw inflate or claim false tax credits on customers' tax returns. According to the complaint, Fields and Shaw frequently claim improper dependent exemptions in order to claim inflated earned-income credits or child tax credits for their customers. The suit also alleges that the defendants include false filing statuses and bogus claims for charitable contributions on customers' returns. The complaint says the government estimates that the defendants' misconduct may have caused revenue losses of more than $5 million from the more than 1,100 tax returns they prepared in 2011.

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Virginia Anesthesiologist Sentenced for Filing False Tax Returns

Dr. George Anderson, fifty-seven, of Farmville, Virginia, was sentenced December 5 to thirty-three months in prison, followed by one year of supervised release, for criminal tax fraud, the Justice Department and IRS announced. US District Judge Henry Hudson, sitting in Richmond, Virginia, also ordered Anderson to pay $471,919 of restitution to the IRS.

Anderson had earlier pleaded guilty to two counts of willfully filing false tax returns. According to the statement of facts filed with the court, Anderson was the sole owner of Farmville Anesthesia Associates Inc. Beginning in 2001, Anderson attempted to reduce his business's tax liability to zero by diverting income to sham and nominee entities. Specifically, Anderson paid hundreds of thousands of dollars' worth of bogus expenses out of Farmville Anesthesia's bank accounts to other accounts held in the names of nominee trusts and limited liability companies Anderson himself controlled. He then falsely reported these payments on Farmville Anesthesia's corporate income tax returns as legitimate business expenses. Later, Anderson spent substantial funds out of the nominee bank accounts for his personal benefit, including for the construction of his personal residence, and did not report the expenditures as income on his personal tax returns.

In his guilty plea, Anderson admitted that he filed a false 2007 corporate income tax return on behalf of Farmville Anesthesia Associates. That return was false because it reported the bogus expenses paid to Anderson-controlled sham entities. Anderson also admitted to filing a false 2005 personal income tax return. That return was false because it did not report the income Anderson spent for his benefit out of the bank accounts held in the names of the nominee trusts and LLCs.

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Court Orders Over $1.1 Million in Restitution to IRS and Forfeiture of Over $7.43 Million

Thomas Dale Overstreet, sixty-eight, of Fruitland, Idaho, was sentenced December 5 to forty-six months in prison, followed by three years of supervised release for income tax evasion, operating an illegal gambling business, and conspiracy to commit money laundering, US Attorney Wendy J. Olson and Assistant Attorney General for the Department of Justice's Tax Division Kathryn Keneally announced. Overstreet was indicted in September 2011 and pleaded guilty in August 2012.

According to court documents, between 2001 and 2011, Overstreet owned and operated Club 7, a bar located in Fruitland, where Overstreet operated an illegal gambling business. Overstreet illegally operated electronic video gambling machines at Club 7, and Club 7 employees illegally made cash payouts to customers who won on the machines. Overstreet tracked payouts to customers and used the meter readings in the video gambling machines to compute his profits from the illegal gambling business.

The Court found that at Overstreet's direction, cash from the illegal gambling business was used to cash checks for members of the public. Cash from the illegal gambling business was also used to refill an ATM in Club 7. Overstreet and Club 7 did not charge a fee for these check cashing or ATM services. The Court found that both services allowed Overstreet to move cash proceeds from Club 7 and the illegal gambling business into a bank account without triggering the reporting requirements that would have arisen if currency deposits were made and also allowed Overstreet to disguise the true nature and source of the deposits, thereby concealing the existence and funds from the illegal gambling business.

Overstreet, who has not filed a tax return since 1999, was found to have evaded the payment of over $477,000 in taxes. Chief US District Judge B. Lynn Winmill ordered Overstreet to pay $1,151,449 in restitution to the IRS, which includes penalties and interest.

In addition, the Court ordered the forfeiture of at least $2,411,467.60, which represents the profits from Overstreet's illegal gambling business, and $5,027,228.25, which represents the property involved in Overstreet's money laundering operation.

The Court further ordered the forfeiture of Club 7, Overstreet's bar located in Fruitland, Idaho, and The Flying High Resort, a beachfront resort located in La Ventana, Mexico, on the Baja California peninsula that Overstreet constructed using the proceeds of his illegal gambling business and money laundering operation.